Incorporation - Types of Business Entities

There are several types of entities that can be incorporated in Sri Lanka are as mentioned below:

• Sole Trader
• Partnership
• Company
• Non-profit motive organization
• Trust

Time Frame for Incorporation of Company in Sri Lanka varies from depending on the type of entity selected. Each business type has its own advantages and disadvantages. YourGlobalPro professionals estimates the time required for the process of Company formation in Sri Lanka to be completed is 10-14 working days.

Benefits of Registration of a Company

Below are the advantages of company formation in Sri Lanka:

• A multi-ethnic, multi-religious country with a diverse and rich culture
• Strategic location on the sea lanes between the East and the West
• First in the South Asian region to promote foreign investment
• 100% foreign ownership is permitted across virtually all areas
• No restrictions on the repatriation of earnings, fees and capital, and on foreign exchange transactions
• Safety of foreign investment is guaranteed by the constitution
• Sophisticated legal and regulatory framework covering, intellectual property, settlement of disputes
• Bilateral investment protection agreements
• Labour is reputed for precision, quality and productivity
• Liberalized economic policy
• Transparent laws & Generous Tax Incentives

Tax Registration and Filing

In Sri Lanka, companies resident in Sri Lanka are subject to income tax on their worldwide income. Non-resident companies are subject to tax on their profits and income derived from Sri Lankan sources.

Double Tax Treaty

Double Tax Agreements (DTA) regulates the tax treatment of income or capital gains in situations where the same taxpayer is taxed twice in two countries for the same subject.  DTA Treaties are important for developing countries as they play a great role in attracting foreign investments, expertise, modern technology etc. Sri Lanka has double taxation treaties with countries as mentioned below: Australia, Japan, Singapore, U.S.A., Bangladesh, Korea, Sweden, Vietnam, Bahrain, Kuwait, Switzerland, Seychelles, Belgium, Malaysia, Thailand, Belarus, Canada, Mauritius, U.A.E., Palestine, China, Nepal, U.A.E., Luxembourg, Czechoslovakia, Netherlands, U.K., Russia, Denmark, Norway, U.S.A., Saudi Arabia, France, Oman, India, Qatar, Finland, Pakistan, Indonesia, Romania, Germany, Philippines, Iran, Italy, Hong Kong, Poland.

Trademark registration

For trademark registration in Sri Lanka, an application needs to be made to the National Intellectual Property Office of Sri Lanka. It takes approximately 10-12 months’ timeframe to complete the trademark registration process.  A Trademark Registration in Sri Lanka is valid ten years from the date of filing trademark and is renewable for ten years period by paying the renewal fee by the expiration date for an unlimited number of times. Also, trademark may be renewed after the renewal due date, within six months from expiry date.

YourGlobalPro professionals are fully equipped to assist you with the process of trademark registration in Sri Lanka for your business in Sri Lanka. For assistance or advise in the matter of the trademark registration in Sri Lanka  or intellectual property – please feel free to write or contact us.

Secretarial Compliance

Below are some of the important points in relation to Company Secretarial Compliance in Sri Lanka:

• Obtaining Licenses and Permits as required under law
• Register with the Inland Revenue Department and Tax Authorities
• Opening a bank account or opting for bank facilities for business requirements
• To file annual return with Department of the Registrar of Companies – every company should at least once in every year deliver to the Registrar General of Companies an annual return in the prescribed form – within 30 working days from the Annual General Meeting for the year whether or not that meeting is the first or only meeting of the shareholders in the year.
• The companies within Sri Lanka / outside Sri Lanka can reserve names in the LK domain until they setup their Website / Mailing Facilities in-house / through an Internet Service Provider.
• LK Domain Registry which provides registration services by registering Internet domain names in Sri Lankan country code top level Internet domain (ccTLD) .lk. as well as the relevant Sinhala and Tamil language top-level domains
• Registration with Sri Lanka Customs and Sri Lanka Export Development Board, Sri Lanka Tea Board (SLTB) for import and export of goods

Accounting Services

The Entities in Sri Lanka are required to maintain proper and accurate accounting records, and prepare financial statements in accordance with the standards issued by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) which are called Sri Lanka Financial Reporting Standards (SLFRS)

YourGlobalPro professionals assist you with the entire bookkeeping and accounting services for your Sri Lanka Business Set up as per your business needs including implementation of financial accounting software, accounting records preparation and time to time preparation of budgets, forecasts.

Auditing service

In Sri Lanka, all Companies are required to prepare annual financial statements and have them audited by professionally qualified auditors who must be the members of CA Sri Lanka, holding a certificate to practice. The companies’ financial statements are prepared as at 31st March as at their year-end and submitted for Registration to the Department of Registrar of Companies.

Based on the size of the business – the companies are required to prepare and file financial statements with the Authority. YourGlobalPro professionals provide auditing services for your business as required by your business.

Banking

The Central Bank of Sri Lanka is the central bank in Sri Lanka regulating the Banks in Sri Lanka. The accounts can be opened and maintained in multi-currency and is available for all major currencies with the commercial Banks.

The documentation requirement differs from Bank to Bank and need to be complied for the Bank account opening.  The major banks in Sri Lanka are Amana Bank, Axis Bank Ltd., Bank of Ceylon, Cargills Bank Ltd., Citibank N.A., Commercial Bank of Ceylon PLC, Deutsche Bank AG, DFCC Bank PLC, Habib Bank Ltd., Hatton National Bank PLC, ICICI Bank Ltd., Indian Bank, Indian Overseas Bank, MCB Bank Ltd., National Savings Bank, National Development Bank PLC, Nations Trust Bank PLC, Pan Asia Banking Corporation PLC, People’s Bank, Public Bank Berhad, Sampath Bank PLC, Seylan Bank PLC, Standard Chartered Bank, State Bank of India, The Hong Kong and Shanghai Banking Corporation Ltd. (HSBC), Union Bank of Colombo PLC. All banks are stable, reliable and offer the same level of services.

YourGlobalPro professionals a facilitate all the paper work in relation to banking need and can assist you in opening bank account for your business plan in Sri Lanka.

Legal and Compliance

In Sri Lanka, the responsibility of legal compliance is not a one-time affair, but a continuous process. Below is the various Sri Lanka legal and compliance requirement to be followed by incorporated entities:

• The Registrar General of Companies (or his Officers) have the sole discretion to approve the name or delegate authority to approve the same.
• The Companies must obtain the Preliminary Planning Clearance/ Development Permit/ Certificate of Conformity, the owner/ developer, as may be applicable to the business.
• To obtain the electricity connection, the company must complete process with Electricity Consumer Service Centre (ECSC).
• To get a water supply connection in Sri Lanka application need to be made to National Water Supply and Drainage Board (NWSDB).
• Registration for Employees’ Provident Fund (EPF) Department of the Central Bank of Sri Lanka need to be done with Department of Labour.
• All the employer company need to maintain Payroll information, cheque roll information, extra allowance information, labour registry, Attendance information, Proof of payment of benefits, Third copy of the “C” certificate at the registered office
• Employers to make Employees’ Trust Fund Board (ETF) payments and upload monthly member contributions details (Form II Returns) through the internet either from the Bank of Ceylon or Commercial Bank.
• Tax Identification Number (TIN) certificate to be obtained from the Department of Inland Revenue.
• The Board of Investment (BOI) prior to the establishment of a foreign business venture in Sri Lanka
• YourGlobalPro professionals can assist you with Sri Lanka Legal and compliance requirements.

HR and Employment Law and Immigration / VISA

In Sri Lanka, the foreigners are allowed to work on work visa which is either work permit. Below are some of the important points in relation to HR & employment law in Sri Lanka:

• A normal working week cannot exceed 48 hours
• All work over and beyond that period is considered overtime.
• A maximum of 12 hours of overtime per week is permitted.
• No woman shall be forced to work at night against her will
• Every woman or young person employed in a factory shall be allowed six whole days as holidays on six consecutive week days per year
• Annual Leave No entitlement in the first year of service. Second year onward, an employee is entitled to 14 days of paid annual leave, after completion of 12 months of continuous service.
• A worker is required to take his annual leave within twelve months of its entitlement.
• Workers are entitled to at least one and a half day of rest per week at the worker’s full rate of remuneration
• Sick leave Seven days for each year of employment.
• An employee’s contribution is 8% of his/her total earnings while employer’s contribution is 12% of worker’s earnings -Under the Employees’ Provident Fund Act.
• Employer is required to remit 20% of the total employee earnings to the EPF department of the Central Bank of Sri Lanka before the last day of the next month.

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